Cameron Urges Transatlantic Trade Deal, Obstacles Remain

Not all Western leaders share David Cameron’s enthusiasm for expanding trade.

Before meeting President Barack Obama in Washington DC on Monday, British prime minister David Cameron urged progress toward forming a transatlantic free-trade zone which he claimed could add as much as £10 billion to his country’s economy and $97 billion to the United States’.

Obama called for such a trade agreement in his annual State of the Union address to Congress in February. Dutch and Italian prime ministers Mark Rutte and Mario Monti had backed the scheme during the World Economic Forum in Switzerland a month earlier. “We should have [had] this years ago,” Rutte, a liberal, said at the time.

Despite the likely gains, obstacles remain. While expressing confidence that a trade deal can eventually be done, Monti also cautioned in January that it would “require important adjustments in policies on both sides of the Atlantic,” particularly in agriculture which is heavily subsidized in the European Union and the United States. Lawmakers might want to exclude liberalization of the sector from an agreement entirely.

In The Wall Street Journal on Sunday, Cameron, however, argued that it made no sense to “exclude vital parts of the economy. Everything must be on the table,” he wrote.

Which is not the case. The Economist‘s Lexington columnist reported last month that the pact was in trouble, “beset by small mindedness and mutual suspicion.” Eastern and Southern European states, led by France, have long lists of demands, insisting that agricultural products and public services are not covered under the treaty. The Americans maintain barriers of their own, in air passenger and financial services, while legislators are reluctant to expand foreign access to a variety of markets, mostly food but also biodiesel and ethanol production, for fear of job losses in their districts and states.

The Economist warns that it may be Western powers’ “last, best chance to craft open, liberal rules for the world economy” before countries like Brazil, China and India demand a greater say in global trade policy.

Europeans tell Americans they wish to unite as standard setters, for fear of becoming “standard takers” in an economic order controlled by emerging giants.

A transatlantic free-trade pact would strengthen the Western alliance as a whole, said former American national security advisor Zbigniew Brzezinski in Bratislava, the capital of Slovakia, last month. “It can shape a new balance between the Pacific and the Atlantic Oceanic regions while at the same time generating in the West a new vitality, more security and greater cohesion.”

Britain would gladly spearhead such an effort and strengthen its “special relationship” with the United States in the process, currently under pressure as the island nation cuts back on defense spending which makes it less of a potent military ally.

“By promoting more trade, fairer taxes and greater transparency, Britain and America can once again lead the way in meeting the greatest challenge of our time,” David cameron argued: “securing the growth and stability on which the prosperity of the whole world depends.”

It is doubtful whether he can persuade all of his European partners to agree to a comprehensive trade deal, especially when he also seeks changes in Britain’s European Union membership ahead of an announced referendum about it in two years’ time. More protectionist European governments might be tempted to condition their support for a looser British affiliation with the continent on a watered down trade agreement or decide it’s better to wait and see whether the United Kingdom remains a member at all.

By then, Barack Obama will be moving out of the White House and his successor probably in less of a hurry to expand transatlantic trade as part of a legacy.